Person to person loans (those from your family or your friends) carry the lowest amount of risk in terms of interest rates, credit reporting and payment terms. Often, you’ll find your friends and family willing to help you on terms that you can work with. This can be a great way to avoid loan sharks and aggressive “payday” loans, that often have interest rates in the range of 40-60 per cent. There are often less barriers to these types of loans as well, similar to those high interest loans.

The risk of course, is in the relationship between you and your friends/family. Not paying back a loan can be awkward and, in some cases, disastrous to your relationship. On their end, they be overextending to help you, and will need the money back as soon as possible, or they may worry that you won’t ever be able to pay them back.

Instead of the usual Is This Option Right For You, here are some tips for navigating this dynamic.

1. Set a repayment goal date.
   1. Having a specific date for all or even a partial part of the sum creates a structure around the loan and enables you to both have something realistic to work around. Having this tied to a pay or an important date will give you a goal to work towards. If you are paying back a portion of the loan, make sure there’s a plan for the rest as well. Whether it will be every paycheck or once a month, a set amount to chip away at your debt will also make the loan more reasonable to the person offering it.
2. Make sure repayment is reasonable.
   1. Setting reasonable expectations for loan repayment can ensure that there are no ill feelings in the time leading up to repayment. If, for example, you’re injured on the job and need help with rent until your benefits come in, you may need to clarify that your income won’t be in a stable enough place until you return to work. Some may want to pay back at the first point of benefits: try to avoid trapping yourself in a perpetual cycle of being behind on your bills. The stress this may place on your relationship can be more damaging in the long run if you keep needing to borrow money.
3. Ask for what you actually need
   1. Similar to the previous point, taking too little can put you in a spiral of debt as your expenses and the sources of debt will add up over time. This can make it hard to manage and the stress of feeling like your drowning in debt can make this very challenging on your mental health – leading to rash decisions. Before you ask for help, make sure you:
4. Budget!
   1. Preparing a budget not only helps identify exactly how much you may need, but also gives you a realistic outlook of how quickly you can repay your debt back.
   2. Be realistic about your budget – no matter what headspace you’re in right now – you will not be able to subsist on crackers and ramen noodles indefinitely.
5. Communicate
   1. Finally, it’s important to communicate your current financial status with this person. They’ll often have a vested interest in your success, so as new job opportunities arise, or you’re met with new challenges, rarely will someone who cares about you want a barrier in your relationship just because they’ve offered to help. Be sure to check in with them as well, every relationship is different.